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Refinancing your home loan to pay for a holiday

How to refinance your mortgage for travel.

Home Loan Tip

While funding a holiday may not be the most traditional motivation to refinance your mortgage, some borrowers consider refinancing at a lower rate to help manage their holiday debt.

If you're planning to take a personal loan to cover the expense of a holiday, one option is to refinance your home loan at a lower rate and use the cost-savings to help cover the cost of a trip. However, this should be carefully considered because failing to plan how you'll repay the holiday debt after it's rolled into your mortgage can increase your interest charges and repayments.

Keep in mind that adding holiday or car debt to your mortgage can put your home at increased risk and it can also harm your refinance application.

Let's look at the below example to understand the risks of refinancing to help manage travel debt.

Dan and Emma’s trip to ThailandRefinancing for holiday travel case study

Dan and Emma have a $400,000 home loan and through their efforts over the last five years, they now owe $360,000. With an interest rate of 5.5%, their repayments are $2,456.35 per month.

Dan and Emma haven't been overseas for years, so they decide to book an extended trip to Thailand for $20,000. With a lack of savings to fund the trip, they're thinking about refinancing with another lender for a 20-year home loan with a lower interest rate of 5.25%. They also consider increasing the loan amount to $390,000 and adding an extra $10,000 to help fund a future renovation.

The new home loan, even with the lower interest rate would increase their monthly repayments to $2,627.99. Due to the total interest charges, this would turn their $20,000 holiday and $10,000 for additional purchases into a combined debt of $48,516.

Dan and Emma decide to speak to a financial planner and a mortgage broker before going ahead with the refinance.

Refinancing the right way

If you're thinking of switching lenders to fund a holiday, make sure you only borrow the amount that you need for the trip. For instance, in the case study above, if Dan and Emma started a repayment schedule and borrowed only the amount they needed for the trip (and didn't get tempted to borrow extra for the renovation), then the refinance could have made financial sense.

If they refinanced to $380,000 at 5.25% for 20 years, this would make their repayments $2,560.61 a month - just over $100 more than their regular repayments.

At 5.25% for 20 years the $20,000 amount would cost $12,344.52 in interest with lower monthly repayments of $134.77.

If Dan and Emma had borrowed the $20,000 at personal loan rates of say 14.5% over five years this would cost them $8,234 in interest, with repayments of $471 a month.

If Dan and Emma added this $471 a month to their loan repayments, this would mean it would take them four years to pay off this amount and would cost them $2,105.05 in interest.

$471 a month is a lot of money, especially if they are already paying a mortgage.

Say they instead added approximately $300 onto their loan per month ($75 a week), this would add only $3,780.04 in interest to the loan and would take the couple a touch under seven years to pay off.

What to watch out for

Keep in mind this example doesn't include the property value of Dan and Emma's home, so the important role equity has in refinancing shouldn't be overlooked.

It's important to note that some lenders will automatically set your new refinanced loan to a new 25 or 30 year loan. If you've paid your loan down then you may want to consider the effect this will have on the overall interest you'll pay.

Watch the video below by Heidi Armstrong of State Custodians Mortgage Company to find out more.

Refinancing home loan options

Rates last updated November 18th, 2018
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2000000 from a convenient online lender.
3.57%
3.58%
$0
$0 p.a.
80%
Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.
3.87%
3.91%
$600
$0 p.a.
95%
A home loan with no ongoing fee and a redraw facility that you can borrow up to 95% LVR.
3.54%
3.57%
$0
$0 p.a.
80%
A competitive variable essentials interest rate product aimed at refinancers looking to switch to a lower rate.
3.68%
3.70%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.49%
3.53%
$250
$0 p.a.
80%
A very low variable interest rate for borrowers with a 20% deposit. Add a 100% offset account for $10 a month.
3.54%
3.58%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility. $900 cashback offer.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Get double Velocity Frequent Flyer Points with this mortgage to spend on flights and more (for a limited time, subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.89%
3.91%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.79%
3.80%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Plus $1,500 cashback offer for eligible refinancers.
3.75%
3.80%
$600
$0 p.a.
90%
Competitive variable rate mortgage with a partial offset account. Get this loan with a 10% deposit.
3.75%
4.72%
$0
$299 p.a.
95%
Owner-occupiers can enjoy a discounted fixed rate, a rate lock feature and the ability to make additional repayments.
3.79%
4.87%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited fees.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150000 get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.75%
3.75%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.
3.59%
4.00%
$845
$350 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.87%
3.91%
$0
$10 monthly ($120 p.a.)
90%
Get Velocity Frequent Flyer Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.68%
3.70%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers that comes with a no fee debit card with a $5,000 limit.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.64%
3.59%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
3.74%
4.13%
$0
$349 p.a.
90%
Get a sharp rate plus package discounts and a 100% offset account.
3.69%
4.12%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.67%
3.72%
$600
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
4.17%
4.21%
$600
$0 p.a.
95%
Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
3.84%
3.85%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn double Velocity Frequent Flyer Points on your mortgage for a limited time (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate. Cut down on interest costs with a 100% offset account.
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at $70% or below with this innovative online lender.
3.84%
4.22%
$345
$0 p.a.
80%
Flexible, competitive variable rate that has flexible repayments, split and redraw facilities.
3.59%
3.58%
$0
$0 p.a.
80%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for a small fee.
3.72%
4.10%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan.
3.84%
3.84%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.85%
3.85%
$0
$0 p.a.
80%
Low fee loan with extra repayments. Pay no application and ongoing fees and take advantage of split and redraw options.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.69%
4.08%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.89%
3.94%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.77%
3.82%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.69%
4.54%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150000 receive a discounted rate. NSW, QLD and ACT residents only.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
3.94%
4.95%
$595
$0 p.a.
95%
Borrow up to 95% LVR of the value of the property you're buying and pay no application or ongoing fees.
4.04%
3.93%
$0
$0 p.a.
80%
Fix your rate for 1 year and make interest-only payments.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.89%
3.94%
$0
$0 p.a.
80%
Pay no application or ongoing fee and borrow up to 80% LVR.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.

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Marc Terrano

Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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HSBC Home Value Loan - (Owner Occupier P&I)

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